Poor administration is holding back charity contracts scheme

The two programmes under fire are ChangeUp, which creates partnerships between charities, and Futurebuilders, which provides loans to improve buildings and staffing levels. Both launched in 2004 and have cost £446m so far.

While the NAO report acknowledges that both have had a positive impact on charities they have both been marred by basic administrative and management problems.

Neither have demonstrated value for money and suffered from a lack of targets to properly measure their effectiveness.

ChangeUp, which is run by Capacitybuilders, was particularly criticised for a lack of long-term vision and wasting money by spending it too quickly.

Take-up of Futurebuilders loans was found to be slow and charities were left confused about its loan structure.

Tim Burr, head of the NAO, said: "Basic flaws in the administration of both programmes have reduced their beneficial impact to date."

The NAO report does acknowledge that action is being taken by Futurebuilders and Capacitybuilders to address these issues.

A statement from Futurebuilders said it had streamlined its application process, which now has a clearer focus on charities that are likely to win contracts.

Youth and children's charities that have been helped by Futurebuilders include Positive Steps Oldham and south west England mental health organisation Coasts.